STATE SETTLEMENT AGREEMENT

l PARTIES

This Settlement Agreement (Agreement) is entered into between the State of

California (the State or California) and CVS Pharmacy Inc and its subsidiaries and

affiliates that operate retail pharmacy stores (collectively CVSpharmacy) hereinafter

collectively referred to as the Parties through their authorized representatives

II PREAMBLE

As a preamble to this Agreement the Parties agree to the following

A On August 13 2009 qui tam plaintiff Stephani LeFlore (LeFlore or the

Relator) filed an amended qui tam complaint in the United States District COUli for the

Western District of Wisconsin captioned United States and State oCalifornia e al ex

rei LeFlore v CVS Caremark Corporation Case No 08-CV -574 (WD Wis) (the Civil

Action) LeFlore alleges in the Civil Action that CVSpharmacys retail stores

knowingly submitted false prescription claims to government health programs in

violation of the False Claims Act sectsect 3729-3733 (FCA) and various state laws by

allegedly overcharging the Medicaid program on prescriptions for individuals who were

covered by both Medicaid and a prim81Y third-party insurance plan

B Defendant CVS Caremark Corporation is the parent company of

CVSphalmacy CVSphannacy which operates the companys retail pharmacy division

currently operates over 7000 retail pharmacies in 41 states and the District of Columbia

and is one of the largest retail pharmacy businesses in the country CVSpharmacy

acquired Longs Drug Stores Corporation a regional retail drug store chain that operated

approximately 500 stores primarily in the State of California on or about October 29

2008 (the Acquisition Date) This Agreement relates only to CVSpharmacys retail

pharmacy business and not to any other business conducted by CVS Caremark

Corporation or its other subsidiaries or affiliates

C CVSpharmacy has entered into a separate civil settlement agreement (the

Federal Settlement Agreement) with the United States on terms described in the

Federal Settlement Agreement CVSphmmacy also has entered into ten separate civil

settlement agreements (each a State Settlement Agreement and collectively the State

Settlement Agreements) including this Agreement with the following states Alabama

California Florida Indiana Massachusetts Michigan Minnesota New Hampshire

Nevada and Rhode Islandmiddot (hereinafter the Pallicipating States) Finally CVS

Caremark Corporation has entered into a first Amendment to the Corporate Integrity

Agreement between the Inspector General of the United States Department of Health and

Human Services (HHS-OIG) and CVS Caremark Corporation (the CIA

Amendment)

D The State contends that CVSphannacy submitted or caused to be submitted

claims for payment to the States Medicaid Program 42 USC sectsect 1396-1396v

E The State contends that it has cellain civil claims against CVSpharmacy for

engaging in the following alleged conduct during the period October I 2002 through

December 31 2010 (Relevant Time Period)

The State alleges that CVSpharmacy knowingly submitted claims during the

Relevant Time Period to the Medicaid programs in the Participating States including in

Califomia for prescription drugs dispensed to persons covered for such claims both by

Medicaid and by a primary third-party insurance plan (excluding Medicare as the primary

2

payor) (the Claims) CVSpharmacy was reimbursed by the Participating States at

various times during the Relevant Time Period in an amount equal to the difference

between what the third-party insurance paid when the Claims were submitted and what

the Participating States would have paid in the absence of third-party insurance The

State alleges that the Claims to the Medicaid Participating States were false because

CVSpharmacy was not entitled during all or part of the Relevant Time Period to

reimbursement in such an amount on all Claims Rather CVSphatmacy should have

claimed and received reimbursement of no more than the amount the insured would have

been obligated to pay had the Claims been submitted solely to the thirdparty insurer

providing coverage The State alleges that as a result of this improper billing

CVSpharmacy received reimbursement amounts from the Participating States that were

higher than the amount it was entitled to receive The allegations concerning the Claims

are hereinafter refen-ed to as the Covered Conduct

Specifically excluded from the Covered Conduct are the claims that are alleged in

F This Agreement is neither an admission of facts liability or wrongdoing

by CVS Ipharmacy nor a concession by the State that its claims are not well founded

CVSphmmacy expressly denies the States contentions as set fortb herein and in the

Civil Action including the contention that it knowingly submitted false claims to the

Participating States Medicaid program

3

G To avoid the delay uncertainty inconvenience and expense ofprotracted

litigation of the above claims and in consideration of the mutual promises and

obligations of this Agreement the Pal1ies agree and covenant as follows

III TERMS AND CONDITIONS

NOW THEREFORE in reliance on the representations contained herein and in

consideration of the mutual promises covenants and obligations set forth in this

Agreement and for good and valuable consideration as stated herein the Parties agree as

follows

1 CVSpharmacy agrees to pay to the United States pursuant (0 the Federal

Settlement Agreement and to the PaJ1icipating States pursuant to the State Settlement

Agreements collectively the sum of Seventeen Million Five Hundred Thousand dollars

($1750000000) plus interest accruing ammally at 3125 beghming February 12011

which shall be paid by electronic funds transfer no later than fourteen (14) days after the

Effective Date of the Federal Settlement Agreement The federal share of the Settlement

Amount is $799361555 and the Participating States share of the Settlement Amount is

$950638445 The federal share of the Settlement Amount shall be paid in accordance

with instructions for payment provided by US Department of Justice The aggregate

Participating States share of the Settlement Amount plus the States pro rata share of

interest accrued on the amount in the Participating States share of the Settlement Amount

shall be paid by electronic funds transfer to the New York State Attorney Generals

National Global Settlement Account (NY State Account) no later than fourteen (14)

days after the Effective Date of the Federal Settlement Agreement pursuant to written

4

2008 (the Acquisition Date) This Agreement relates only to CVSpharmacys retail

pharmacy business and not to any other business conducted by CVS Caremark

Corporation or its other subsidiaries or affiliates

C CVSpharmacy has entered into a separate civil settlement agreement (the

Federal Settlement Agreement) with the United States on terms described in the

Federal Settlement Agreement CVSphmmacy also has entered into ten separate civil

settlement agreements (each a State Settlement Agreement and collectively the State

Settlement Agreements) including this Agreement with the following states Alabama

California Florida Indiana Massachusetts Michigan Minnesota New Hampshire

Nevada and Rhode Islandmiddot (hereinafter the Pallicipating States) Finally CVS

Caremark Corporation has entered into a first Amendment to the Corporate Integrity

Agreement between the Inspector General of the United States Department of Health and

Human Services (HHS-OIG) and CVS Caremark Corporation (the CIA

Amendment)

D The State contends that CVSphannacy submitted or caused to be submitted

claims for payment to the States Medicaid Program 42 USC sectsect 1396-1396v

E The State contends that it has cellain civil claims against CVSpharmacy for

engaging in the following alleged conduct during the period October I 2002 through

December 31 2010 (Relevant Time Period)

The State alleges that CVSpharmacy knowingly submitted claims during the

Relevant Time Period to the Medicaid programs in the Participating States including in

Califomia for prescription drugs dispensed to persons covered for such claims both by

Medicaid and by a primary third-party insurance plan (excluding Medicare as the primary

2

payor) (the Claims) CVSpharmacy was reimbursed by the Participating States at

various times during the Relevant Time Period in an amount equal to the difference

between what the third-party insurance paid when the Claims were submitted and what

the Participating States would have paid in the absence of third-party insurance The

State alleges that the Claims to the Medicaid Participating States were false because

CVSpharmacy was not entitled during all or part of the Relevant Time Period to

reimbursement in such an amount on all Claims Rather CVSphatmacy should have

claimed and received reimbursement of no more than the amount the insured would have

been obligated to pay had the Claims been submitted solely to the thirdparty insurer

providing coverage The State alleges that as a result of this improper billing

CVSpharmacy received reimbursement amounts from the Participating States that were

higher than the amount it was entitled to receive The allegations concerning the Claims

are hereinafter refen-ed to as the Covered Conduct

Specifically excluded from the Covered Conduct are the claims that are alleged in

F This Agreement is neither an admission of facts liability or wrongdoing

by CVS Ipharmacy nor a concession by the State that its claims are not well founded

CVSphmmacy expressly denies the States contentions as set fortb herein and in the

Civil Action including the contention that it knowingly submitted false claims to the

Participating States Medicaid program

3

G To avoid the delay uncertainty inconvenience and expense ofprotracted

litigation of the above claims and in consideration of the mutual promises and

obligations of this Agreement the Pal1ies agree and covenant as follows

III TERMS AND CONDITIONS

NOW THEREFORE in reliance on the representations contained herein and in

consideration of the mutual promises covenants and obligations set forth in this

Agreement and for good and valuable consideration as stated herein the Parties agree as

follows

1 CVSpharmacy agrees to pay to the United States pursuant (0 the Federal

Settlement Agreement and to the PaJ1icipating States pursuant to the State Settlement

Agreements collectively the sum of Seventeen Million Five Hundred Thousand dollars

($1750000000) plus interest accruing ammally at 3125 beghming February 12011

which shall be paid by electronic funds transfer no later than fourteen (14) days after the

Effective Date of the Federal Settlement Agreement The federal share of the Settlement

Amount is $799361555 and the Participating States share of the Settlement Amount is

$950638445 The federal share of the Settlement Amount shall be paid in accordance

with instructions for payment provided by US Department of Justice The aggregate

Participating States share of the Settlement Amount plus the States pro rata share of

interest accrued on the amount in the Participating States share of the Settlement Amount

shall be paid by electronic funds transfer to the New York State Attorney Generals

National Global Settlement Account (NY State Account) no later than fourteen (14)

days after the Effective Date of the Federal Settlement Agreement pursuant to written

4

payor) (the Claims) CVSpharmacy was reimbursed by the Participating States at

various times during the Relevant Time Period in an amount equal to the difference

between what the third-party insurance paid when the Claims were submitted and what

the Participating States would have paid in the absence of third-party insurance The

State alleges that the Claims to the Medicaid Participating States were false because

CVSpharmacy was not entitled during all or part of the Relevant Time Period to

reimbursement in such an amount on all Claims Rather CVSphatmacy should have

claimed and received reimbursement of no more than the amount the insured would have

been obligated to pay had the Claims been submitted solely to the thirdparty insurer

providing coverage The State alleges that as a result of this improper billing

CVSpharmacy received reimbursement amounts from the Participating States that were

higher than the amount it was entitled to receive The allegations concerning the Claims

are hereinafter refen-ed to as the Covered Conduct

Specifically excluded from the Covered Conduct are the claims that are alleged in

F This Agreement is neither an admission of facts liability or wrongdoing

by CVS Ipharmacy nor a concession by the State that its claims are not well founded

CVSphmmacy expressly denies the States contentions as set fortb herein and in the

Civil Action including the contention that it knowingly submitted false claims to the

Participating States Medicaid program

3

G To avoid the delay uncertainty inconvenience and expense ofprotracted

litigation of the above claims and in consideration of the mutual promises and

obligations of this Agreement the Pal1ies agree and covenant as follows

III TERMS AND CONDITIONS

NOW THEREFORE in reliance on the representations contained herein and in

consideration of the mutual promises covenants and obligations set forth in this

Agreement and for good and valuable consideration as stated herein the Parties agree as

follows

1 CVSpharmacy agrees to pay to the United States pursuant (0 the Federal

Settlement Agreement and to the PaJ1icipating States pursuant to the State Settlement

Agreements collectively the sum of Seventeen Million Five Hundred Thousand dollars

($1750000000) plus interest accruing ammally at 3125 beghming February 12011

which shall be paid by electronic funds transfer no later than fourteen (14) days after the

Effective Date of the Federal Settlement Agreement The federal share of the Settlement

Amount is $799361555 and the Participating States share of the Settlement Amount is

$950638445 The federal share of the Settlement Amount shall be paid in accordance

with instructions for payment provided by US Department of Justice The aggregate

Participating States share of the Settlement Amount plus the States pro rata share of

interest accrued on the amount in the Participating States share of the Settlement Amount

shall be paid by electronic funds transfer to the New York State Attorney Generals

National Global Settlement Account (NY State Account) no later than fourteen (14)

days after the Effective Date of the Federal Settlement Agreement pursuant to written

4

G To avoid the delay uncertainty inconvenience and expense ofprotracted

litigation of the above claims and in consideration of the mutual promises and

obligations of this Agreement the Pal1ies agree and covenant as follows

III TERMS AND CONDITIONS

NOW THEREFORE in reliance on the representations contained herein and in

consideration of the mutual promises covenants and obligations set forth in this

Agreement and for good and valuable consideration as stated herein the Parties agree as

follows

1 CVSpharmacy agrees to pay to the United States pursuant (0 the Federal

Settlement Agreement and to the PaJ1icipating States pursuant to the State Settlement

Agreements collectively the sum of Seventeen Million Five Hundred Thousand dollars

($1750000000) plus interest accruing ammally at 3125 beghming February 12011

which shall be paid by electronic funds transfer no later than fourteen (14) days after the

Effective Date of the Federal Settlement Agreement The federal share of the Settlement

Amount is $799361555 and the Participating States share of the Settlement Amount is

$950638445 The federal share of the Settlement Amount shall be paid in accordance

with instructions for payment provided by US Department of Justice The aggregate

Participating States share of the Settlement Amount plus the States pro rata share of

interest accrued on the amount in the Participating States share of the Settlement Amount

shall be paid by electronic funds transfer to the New York State Attorney Generals

National Global Settlement Account (NY State Account) no later than fourteen (14)

days after the Effective Date of the Federal Settlement Agreement pursuant to written

4

instructions to be provided by the State Team Thereafter CVSpharmacy shall have no

continuing obligations with respect to any payment to the Participating States or to the

State

(a) CVSpharmacy shall execute a State Settlement Agreement with each

Participating State in the form to which CVSpharmacy and the State Team have agreed

or in a form otherwise agreed to by CVSpharmacy and an individual State provided that

the State Team and all Palticipating States act with all due speed to attempt to deliver the

fhlly executed State Settlement Agreements to CVSpharmacy by April 15 20 II or as

soon thereafter as possible but before May 10 20 II

(b) The individual Participating States share of the Settlement Amount

allocated to the State of California uDder this Agreement is the sum of$87913905 plus

applicable interest (the State Amount)

2 Contingent upon CVSpharmacys full payment of the State Settlement

Amount and accrued interest the Patticipating States agree to pay as soon as feasible

after such receipt an agreed-upon amount that has been addressed via a side letter to the

PlaintiffRelator in the Civil Action

3 Subject to the exceptions in Paragraph 4 below and conditioned upon

CVSpharmacys full payment of the State Settlement Amount and accrued interest and

subject to Paragraph II below (concerning bankruptcy proceedings commenced within

91 days of the Effective Date of this Agreement or any payment under this Agreement)

the State releases CVSpharmacy together with its current and FOlmer officers directors

parents agents and employees from any civil or administrative monetary claim the State

has for the Covered Conduct under the State Medicaid false claims statute and common

5

law theories offraud payment by mistake disgorgement unjust enrichment and breach

of contract Additionally the State agrees not to pursue any civil or administrative

monetary penalties under the state false claims act for the same or similar conduct as the

Covered Conduct for the period January 1 2011 through the Effective Date of this

Agreement However nothing shall prevent the Stales Medicaid program from

exercising its authority to collect any overpayment that may be identified as having

occulTed during the period from January 12011 through the Effective Date of this

Agreement

4 Notwithstanding any term of this Agreement the State specifically

reserves and does not release the following claims

(a) any criminal civil or administrative liability arising under state revenue

codes

(b) any criminal liability not specifically released by this Agreement

(c) any civil or administrative liability that any person or entity has or may have

to the State or to individual consumers or state program payors under any statute

regulation or rule not expressly covered by the release in paragraph 3 above including

but not limited to any and all of the following claims (i) State or federal antitrust

violations (ii) claims involving unfair andor deceptive acts and practices andlor

violations of consumer protection laws

(d) any liability to the State for any conduct other than the Covered Conduct

(e) any liability which may be asserted on behalf of any other payors or insurers

including those that are paid by the State Medicaid Program on a capitated basis

(f) any liability based upon obligations created by this Agreement

6

(g) except as explicitly stated in this Agreement any administrative liability

including mandatory exclusions from the States Medicaid program

(h) any expressed or implied warranty claims or other liability for defective or

deficient products and services provided by CVSfphannacy

(i) any liability for personal injury or propMy damage or for other consequential

damages arising from the Covered Conduct

G) any liability based on a failure to deliver items or services due and

5 In consideration of the obligations of CVSfpharmacy set f01ih in this

Agreement and the Amendment to the Corporate Integrity Agreement that CVS

Caremark Corporation has entered into with (HHS-OIG) in connection with this matter

and conditioned on full payment by CVSfpharmacy of the State Settlement Amount

except as reserved in Paragraph 3 and 4 above and subject to Paragraph 11 below

(concerning bankruptcy proceedings commenced within 91 days of the Effective Date of

this Agreement or any payment under this Agreement) the State agrees to release and

refrain from instituting recommending directing or maintaining any administrative

action seeking exclusion from the States Medicaid program against CVSfpharmacy or its

parent CVS Caremark Corporation for the Covered Conduct Nothing in this

Agreement precludes the State from taking action against CVSfpha1macy or its parent

7

CVS Caremark Corporation in the event that it is excluded by the federal govemment or

for conduct and practices other than the Covered Conduct

6 CVSpharmacy waives and shall not assert any defenses CVSphmmacy

may have to criminal prosecution or administrative action relating to the Covered

Conduct that may be based in whole or in part on a contention that under the Double

Jeopardy Clause of the Fifth Amendment of the Constitution or under the Excessive

Fines Clause of the Eighth Amendment to the Constitution this Agreement bars a remedy

sought in such criminal prosecution or administrative action

7 CVSpharmacy together with its current and former officers directors

parents agents and employees fully and finally releases the State and its agencies

officers agents political subdivisions departments employees and servants from any

claims (including attorneys fees costs and expenses ofevery kind and however

denominated) that CVS Ipharmacy has asserted could have asserted or may assert in the

future against the State its agencies officers agents political subdivisions employees

and servants related to the Covered Conduct and the States investigation and prosecution

thereof

8 The State Settlement Amount shall not be decreased as a result of the

denial of claims for payment now being withheld from payment by the States Medicaid

program or any other state payor related to the Covered Conduct and CVSpharmacy

agrees not to resubmit to the States Medicaid program or any other state payor any

previously denied claims which denials related to the Covered Conduct and agrees not

to appeal or cause the appeal of any such denials of claims

8

9 CVSphmmacy shall not seek payment for any of the claims for

reimbursement to Medicaid covered by this Agreement from any health care beneficiaries

or their parents sponsors legally-responsible individuals or third-party payors

10 CVSpharmacy expressly warrants that it has reviewed its financial

condition and that it is currently solvent within the meaning of 11 USC sectsect 547(b)(3)

and 548(a)(B)(ii)(I) and shall remain solvent following payment of the Federal

Settlement Amount and compliance with sub-paragraphs IllIb(i) (ii) and (iv) of the

Federal Settlement Agreement Further the Parties expressly wanant that in evaluating

whether to execute this Agreement the Parties (a) have intended that the mutual

promises covenants and obligations set forth herein constitute a contemporaneous

exchange for new value given to CVSpharmacy within the meaning of 11 USC sect

547(c)(I) and (b) have concluded that these mutual promises covenants and obligations

do in fact constitute such a contemporaneous exchange

II In the event CVSpharmacy commences or another party commences

within 91 days of the Effective Date of this Agreement or any payment made hereunder

any case proceeding or other action under any law relating to bankruptcy insolvency

reorganization or relief ofdebtors (a) seeking to have any order for relief of

CVSsphannacys debts or seeking to adjudicate CVSpharmacy as bankrupt or

insolvent or (b) seeking appointment of a receiver tl1lstee custodian or other similar

official for CVSphannacy or for all or any substantial part ofCVSspharmacys assets

CVSpharmacy agrees as follows to the extent consistent with applicable law

(a) CVSspharmacys obligations under this Agreement may not be avoided

pursuant to 11 USC sectsect 547 or 548 and CVSpharmacy shall not argue or otherwise

9

take the position in any such case proceeding or action that (i) CVSspharmacys

obligations under this Agreement may be avoided under II USC sectsect 547 or 548 (ii)

CVSpharmacy was insolvent at the time tillS Agreement was entered into or became

insolvent as a result of the payment made to the State hereunder or (iii) the mutual

promises covenants and obligations set fOlih in this Agreement do not constitute a

contemporaneous exchange for new value given to CVSpharmacy

(b) If CVSpharmacy s obligations under this Agreement are avoided for any

reason including but not limited to through the exercise of a trustees avoidance powers

under the Bankruptcy Code the State at its sole option may rescind the releases

provided in this Agreement and bring any civil andlor administrative action or

proceeding against CVSfphatmacy for the liability that would otherwise be covered by

the releases provided in this Agreement If the State chooses to do so CVSfpharmacy

agrees that for purposes only of any actions or proceedings referenced in this first clause

of this Paragraph any such actions or proceedings brought by the State (including any

proceedings to exclude CVSphalmacy from participation in the States Medicaid

program) are not subject to an automatic stay pursuant to 11 USc sect 362(a) as a result

ofthe action case or proceeding described in the first clause of this Paragraph and that

CVSphalmacy shaH not argue or otherwise contend that the States actions or

proceedings are subject to an automatic stay CVSfpharmacy shall not plead argue or

otherwise raise any defenses under the theories of statute of limitations laches estoppel

or similar theories to any such civil or administrative actions or proceedings whicb are

brought by the State within 90 calendar days of written notification to CVSpharmacy

that the releases herein have been rescinded pursuant to this Paragraph except to the

10

extent such defenses were available before June 24 2005 and the State has a valid

demand against CVSpharmacy in the amount of its share of the State Settlement Amount

plus applicable multipliers and penalties and it may pursue its demand inter alia in the

case action or proceeding referenced in the first clause of this Paragraph as well as in

any other case action or proceeding and CVSphannacy acknowledges that its

agreements in this Paragraph are provided in exchange for valuable consideration

provided in this Agreement

12 The Parties each represent that this Agreement is freely and voluntllfily

entered into without any degree of duress or compulsion whatsoever

13 CVSphatmacy agrees to cooperate fully and truthfully with any State

investigation of individuals or entities not released in this Agreement Upon reasonable

notice CVSphannacy shall facilitate and agrees not to impair the cooperation of its

directors officers employees or agents for interviews and testimony consistent with the

rights and privileges of such individuals and of CVSpharmacy Upon request

CVSphatmacy agrees to nlrnish the State complete and unredacted copies of all nonshy

privileged documents reports memoranda of interviews and records in its possession

custody or control concerning individuals entities and or conduct not released in this

Agreement CVSpharnlacy shall be responsible for all costs it may incur in complying

with this paragraph

14 Except as expressly provided to the contrary in this Agreement each Paliy

to this Agreement shall bear its own legal and other costs incurred in connection with this

matter including the preparation and perfOlmance of this Agreement

II

15 This Agreement is intended to be for the benefit of the Parties only The

Parties do not release any claims against any other person or entity except to the extent

provided for in Paragraph 9 (waiver for beneficiaries paragraph) above

16 Except as otherwise stated in this Agreement this Agreement is intended

to be for the benefit of the Parties only and by this instrument the Paliies do not release

any liability against any other person or entity

[7 Upon receipt of the State Settlement payments described in paragraph I

above the Pmiicipating States shall consent to Relators dismissal ofthe Civil Action as

to the claims for the Covered Conduct and without prejudice as to all other state law

claims

18 In addition to all other payments and responsibilities under this Agreement

CVSphatmacy agrees to pay all reasonable expenses of the State Team CVSphannacy

will pay this amount by separate check made payable to the National Association of

Medicaid Fraud Control Units after the Medicaid Participating States execute their

respective Agreements or as otherwise agreed by the Paliies

19 Nothing in this Agreement constitutes an agreement by the State

concerning the characterization of the amounts paid hereunder for purposes of the States

revenue code

20 This Agreement is governed by the laws of the State

21 The undersigned CVSphmmacy signatories represent and warrant that

they are authorized as a result of appropriate corporate action to execute this Agreement

The undersigned State signatories represent that they are signing this Agreement in their

12

official capacities and that they are authorized to execute this Agreement on behalf of the

State through their respective agencies and departments

22 This Agreement is effective on the date of signature of the last signatory to

this Agreement (the Effective Date) However no obligations under this Agreement

shall begin to run until the Effective Date of the Federal Settlement Agreement as that

term is defined in the Federal Settlement Agreement Facsimiles of signatures shall

constitute acceptable binding signatures for purposes of this Agreement

23 This Agreement shall be binding on CVSpharmacys parent successors

transferees heirs and assigns

24 This Settlement Agreement constitutes the complete agreement between

the Parties with respect to tlus matter and shall not be amended except by written consent

of the Paliies

25 This Agreement may be executed in counterpmis each of which shall

constitute an original and all of which shall constitute one and the same Agreement

26 All Parties consent to the States disclosure of this Agreement and

information about this Agreement to the public

13

STATE OF CALIFORNIA

1 By Dated~1

Nicholas N Paul Supervising Deputy Alloriley General Office of the Attorney General Bureau of Medi-Cal Fraud and Elder Abuse 1455 Frazee Road Suite 315 San Diego CA 92l()8

By

Toby Douglas Director California Del)artlllen of Health Care Services 1501 CapitolAvenue Suite 716001 Sacramento CA 95814

14

(g) except as explicitly stated in this Agreement any administrative liability

including mandatory exclusions from the States Medicaid program

(h) any expressed or implied warranty claims or other liability for defective or

deficient products and services provided by CVSfphannacy

(i) any liability for personal injury or propMy damage or for other consequential

damages arising from the Covered Conduct

G) any liability based on a failure to deliver items or services due and

5 In consideration of the obligations of CVSfpharmacy set f01ih in this

Agreement and the Amendment to the Corporate Integrity Agreement that CVS

Caremark Corporation has entered into with (HHS-OIG) in connection with this matter

and conditioned on full payment by CVSfpharmacy of the State Settlement Amount

except as reserved in Paragraph 3 and 4 above and subject to Paragraph 11 below

(concerning bankruptcy proceedings commenced within 91 days of the Effective Date of

this Agreement or any payment under this Agreement) the State agrees to release and

refrain from instituting recommending directing or maintaining any administrative

action seeking exclusion from the States Medicaid program against CVSfpharmacy or its

parent CVS Caremark Corporation for the Covered Conduct Nothing in this

Agreement precludes the State from taking action against CVSfpha1macy or its parent

7

CVS Caremark Corporation in the event that it is excluded by the federal govemment or

for conduct and practices other than the Covered Conduct

6 CVSpharmacy waives and shall not assert any defenses CVSphmmacy

may have to criminal prosecution or administrative action relating to the Covered

Conduct that may be based in whole or in part on a contention that under the Double

Jeopardy Clause of the Fifth Amendment of the Constitution or under the Excessive

Fines Clause of the Eighth Amendment to the Constitution this Agreement bars a remedy

sought in such criminal prosecution or administrative action

7 CVSpharmacy together with its current and former officers directors

parents agents and employees fully and finally releases the State and its agencies

officers agents political subdivisions departments employees and servants from any

claims (including attorneys fees costs and expenses ofevery kind and however

denominated) that CVS Ipharmacy has asserted could have asserted or may assert in the

future against the State its agencies officers agents political subdivisions employees

and servants related to the Covered Conduct and the States investigation and prosecution

thereof

8 The State Settlement Amount shall not be decreased as a result of the

denial of claims for payment now being withheld from payment by the States Medicaid

program or any other state payor related to the Covered Conduct and CVSpharmacy

agrees not to resubmit to the States Medicaid program or any other state payor any

previously denied claims which denials related to the Covered Conduct and agrees not

to appeal or cause the appeal of any such denials of claims

8

9 CVSphmmacy shall not seek payment for any of the claims for

reimbursement to Medicaid covered by this Agreement from any health care beneficiaries

or their parents sponsors legally-responsible individuals or third-party payors

10 CVSpharmacy expressly warrants that it has reviewed its financial

condition and that it is currently solvent within the meaning of 11 USC sectsect 547(b)(3)

and 548(a)(B)(ii)(I) and shall remain solvent following payment of the Federal

Settlement Amount and compliance with sub-paragraphs IllIb(i) (ii) and (iv) of the

Federal Settlement Agreement Further the Parties expressly wanant that in evaluating

whether to execute this Agreement the Parties (a) have intended that the mutual

promises covenants and obligations set forth herein constitute a contemporaneous

exchange for new value given to CVSpharmacy within the meaning of 11 USC sect

547(c)(I) and (b) have concluded that these mutual promises covenants and obligations

do in fact constitute such a contemporaneous exchange

II In the event CVSpharmacy commences or another party commences

within 91 days of the Effective Date of this Agreement or any payment made hereunder

any case proceeding or other action under any law relating to bankruptcy insolvency

reorganization or relief ofdebtors (a) seeking to have any order for relief of

CVSsphannacys debts or seeking to adjudicate CVSpharmacy as bankrupt or

insolvent or (b) seeking appointment of a receiver tl1lstee custodian or other similar

official for CVSphannacy or for all or any substantial part ofCVSspharmacys assets

CVSpharmacy agrees as follows to the extent consistent with applicable law

(a) CVSspharmacys obligations under this Agreement may not be avoided

pursuant to 11 USC sectsect 547 or 548 and CVSpharmacy shall not argue or otherwise

9

take the position in any such case proceeding or action that (i) CVSspharmacys

obligations under this Agreement may be avoided under II USC sectsect 547 or 548 (ii)

CVSpharmacy was insolvent at the time tillS Agreement was entered into or became

insolvent as a result of the payment made to the State hereunder or (iii) the mutual

promises covenants and obligations set fOlih in this Agreement do not constitute a

contemporaneous exchange for new value given to CVSpharmacy

(b) If CVSpharmacy s obligations under this Agreement are avoided for any

reason including but not limited to through the exercise of a trustees avoidance powers

under the Bankruptcy Code the State at its sole option may rescind the releases

provided in this Agreement and bring any civil andlor administrative action or

proceeding against CVSfphatmacy for the liability that would otherwise be covered by

the releases provided in this Agreement If the State chooses to do so CVSfpharmacy

agrees that for purposes only of any actions or proceedings referenced in this first clause

of this Paragraph any such actions or proceedings brought by the State (including any

proceedings to exclude CVSphalmacy from participation in the States Medicaid

program) are not subject to an automatic stay pursuant to 11 USc sect 362(a) as a result

ofthe action case or proceeding described in the first clause of this Paragraph and that

CVSphalmacy shaH not argue or otherwise contend that the States actions or

proceedings are subject to an automatic stay CVSfpharmacy shall not plead argue or

otherwise raise any defenses under the theories of statute of limitations laches estoppel

or similar theories to any such civil or administrative actions or proceedings whicb are

brought by the State within 90 calendar days of written notification to CVSpharmacy

that the releases herein have been rescinded pursuant to this Paragraph except to the

10

extent such defenses were available before June 24 2005 and the State has a valid

demand against CVSpharmacy in the amount of its share of the State Settlement Amount

plus applicable multipliers and penalties and it may pursue its demand inter alia in the

case action or proceeding referenced in the first clause of this Paragraph as well as in

any other case action or proceeding and CVSphannacy acknowledges that its

agreements in this Paragraph are provided in exchange for valuable consideration

provided in this Agreement

12 The Parties each represent that this Agreement is freely and voluntllfily

entered into without any degree of duress or compulsion whatsoever

13 CVSphatmacy agrees to cooperate fully and truthfully with any State

investigation of individuals or entities not released in this Agreement Upon reasonable

notice CVSphannacy shall facilitate and agrees not to impair the cooperation of its

directors officers employees or agents for interviews and testimony consistent with the

rights and privileges of such individuals and of CVSpharmacy Upon request

CVSphatmacy agrees to nlrnish the State complete and unredacted copies of all nonshy

privileged documents reports memoranda of interviews and records in its possession

custody or control concerning individuals entities and or conduct not released in this

Agreement CVSpharnlacy shall be responsible for all costs it may incur in complying

with this paragraph

14 Except as expressly provided to the contrary in this Agreement each Paliy

to this Agreement shall bear its own legal and other costs incurred in connection with this

matter including the preparation and perfOlmance of this Agreement

II

15 This Agreement is intended to be for the benefit of the Parties only The

Parties do not release any claims against any other person or entity except to the extent

provided for in Paragraph 9 (waiver for beneficiaries paragraph) above

16 Except as otherwise stated in this Agreement this Agreement is intended

to be for the benefit of the Parties only and by this instrument the Paliies do not release

any liability against any other person or entity

[7 Upon receipt of the State Settlement payments described in paragraph I

above the Pmiicipating States shall consent to Relators dismissal ofthe Civil Action as

to the claims for the Covered Conduct and without prejudice as to all other state law

claims

18 In addition to all other payments and responsibilities under this Agreement

CVSphatmacy agrees to pay all reasonable expenses of the State Team CVSphannacy

will pay this amount by separate check made payable to the National Association of

Medicaid Fraud Control Units after the Medicaid Participating States execute their

respective Agreements or as otherwise agreed by the Paliies

19 Nothing in this Agreement constitutes an agreement by the State

concerning the characterization of the amounts paid hereunder for purposes of the States

revenue code

20 This Agreement is governed by the laws of the State

21 The undersigned CVSphmmacy signatories represent and warrant that

they are authorized as a result of appropriate corporate action to execute this Agreement

The undersigned State signatories represent that they are signing this Agreement in their

12

official capacities and that they are authorized to execute this Agreement on behalf of the

State through their respective agencies and departments

22 This Agreement is effective on the date of signature of the last signatory to

this Agreement (the Effective Date) However no obligations under this Agreement

shall begin to run until the Effective Date of the Federal Settlement Agreement as that

term is defined in the Federal Settlement Agreement Facsimiles of signatures shall

constitute acceptable binding signatures for purposes of this Agreement

23 This Agreement shall be binding on CVSpharmacys parent successors

transferees heirs and assigns

24 This Settlement Agreement constitutes the complete agreement between

the Parties with respect to tlus matter and shall not be amended except by written consent

of the Paliies

25 This Agreement may be executed in counterpmis each of which shall

constitute an original and all of which shall constitute one and the same Agreement

26 All Parties consent to the States disclosure of this Agreement and

information about this Agreement to the public

13

STATE OF CALIFORNIA

1 By Dated~1

Nicholas N Paul Supervising Deputy Alloriley General Office of the Attorney General Bureau of Medi-Cal Fraud and Elder Abuse 1455 Frazee Road Suite 315 San Diego CA 92l()8

By

Toby Douglas Director California Del)artlllen of Health Care Services 1501 CapitolAvenue Suite 716001 Sacramento CA 95814

14

CVS Caremark Corporation in the event that it is excluded by the federal govemment or

for conduct and practices other than the Covered Conduct

6 CVSpharmacy waives and shall not assert any defenses CVSphmmacy

may have to criminal prosecution or administrative action relating to the Covered

Conduct that may be based in whole or in part on a contention that under the Double

Jeopardy Clause of the Fifth Amendment of the Constitution or under the Excessive

Fines Clause of the Eighth Amendment to the Constitution this Agreement bars a remedy

sought in such criminal prosecution or administrative action

7 CVSpharmacy together with its current and former officers directors

parents agents and employees fully and finally releases the State and its agencies

officers agents political subdivisions departments employees and servants from any

claims (including attorneys fees costs and expenses ofevery kind and however

denominated) that CVS Ipharmacy has asserted could have asserted or may assert in the

future against the State its agencies officers agents political subdivisions employees

and servants related to the Covered Conduct and the States investigation and prosecution

thereof

8 The State Settlement Amount shall not be decreased as a result of the

denial of claims for payment now being withheld from payment by the States Medicaid

program or any other state payor related to the Covered Conduct and CVSpharmacy

agrees not to resubmit to the States Medicaid program or any other state payor any

previously denied claims which denials related to the Covered Conduct and agrees not

to appeal or cause the appeal of any such denials of claims

8

9 CVSphmmacy shall not seek payment for any of the claims for

reimbursement to Medicaid covered by this Agreement from any health care beneficiaries

or their parents sponsors legally-responsible individuals or third-party payors

10 CVSpharmacy expressly warrants that it has reviewed its financial

condition and that it is currently solvent within the meaning of 11 USC sectsect 547(b)(3)

and 548(a)(B)(ii)(I) and shall remain solvent following payment of the Federal

Settlement Amount and compliance with sub-paragraphs IllIb(i) (ii) and (iv) of the

Federal Settlement Agreement Further the Parties expressly wanant that in evaluating

whether to execute this Agreement the Parties (a) have intended that the mutual

promises covenants and obligations set forth herein constitute a contemporaneous

exchange for new value given to CVSpharmacy within the meaning of 11 USC sect

547(c)(I) and (b) have concluded that these mutual promises covenants and obligations

do in fact constitute such a contemporaneous exchange

II In the event CVSpharmacy commences or another party commences

within 91 days of the Effective Date of this Agreement or any payment made hereunder

any case proceeding or other action under any law relating to bankruptcy insolvency

reorganization or relief ofdebtors (a) seeking to have any order for relief of

CVSsphannacys debts or seeking to adjudicate CVSpharmacy as bankrupt or

insolvent or (b) seeking appointment of a receiver tl1lstee custodian or other similar

official for CVSphannacy or for all or any substantial part ofCVSspharmacys assets

CVSpharmacy agrees as follows to the extent consistent with applicable law

(a) CVSspharmacys obligations under this Agreement may not be avoided

pursuant to 11 USC sectsect 547 or 548 and CVSpharmacy shall not argue or otherwise

9

take the position in any such case proceeding or action that (i) CVSspharmacys

obligations under this Agreement may be avoided under II USC sectsect 547 or 548 (ii)

CVSpharmacy was insolvent at the time tillS Agreement was entered into or became

insolvent as a result of the payment made to the State hereunder or (iii) the mutual

promises covenants and obligations set fOlih in this Agreement do not constitute a

contemporaneous exchange for new value given to CVSpharmacy

(b) If CVSpharmacy s obligations under this Agreement are avoided for any

reason including but not limited to through the exercise of a trustees avoidance powers

under the Bankruptcy Code the State at its sole option may rescind the releases

provided in this Agreement and bring any civil andlor administrative action or

proceeding against CVSfphatmacy for the liability that would otherwise be covered by

the releases provided in this Agreement If the State chooses to do so CVSfpharmacy

agrees that for purposes only of any actions or proceedings referenced in this first clause

of this Paragraph any such actions or proceedings brought by the State (including any

proceedings to exclude CVSphalmacy from participation in the States Medicaid

program) are not subject to an automatic stay pursuant to 11 USc sect 362(a) as a result

ofthe action case or proceeding described in the first clause of this Paragraph and that

CVSphalmacy shaH not argue or otherwise contend that the States actions or

proceedings are subject to an automatic stay CVSfpharmacy shall not plead argue or

otherwise raise any defenses under the theories of statute of limitations laches estoppel

or similar theories to any such civil or administrative actions or proceedings whicb are

brought by the State within 90 calendar days of written notification to CVSpharmacy

that the releases herein have been rescinded pursuant to this Paragraph except to the

10

extent such defenses were available before June 24 2005 and the State has a valid

demand against CVSpharmacy in the amount of its share of the State Settlement Amount

plus applicable multipliers and penalties and it may pursue its demand inter alia in the

case action or proceeding referenced in the first clause of this Paragraph as well as in

any other case action or proceeding and CVSphannacy acknowledges that its

agreements in this Paragraph are provided in exchange for valuable consideration

provided in this Agreement

12 The Parties each represent that this Agreement is freely and voluntllfily

entered into without any degree of duress or compulsion whatsoever

13 CVSphatmacy agrees to cooperate fully and truthfully with any State

investigation of individuals or entities not released in this Agreement Upon reasonable

notice CVSphannacy shall facilitate and agrees not to impair the cooperation of its

directors officers employees or agents for interviews and testimony consistent with the

rights and privileges of such individuals and of CVSpharmacy Upon request

CVSphatmacy agrees to nlrnish the State complete and unredacted copies of all nonshy

privileged documents reports memoranda of interviews and records in its possession

custody or control concerning individuals entities and or conduct not released in this

Agreement CVSpharnlacy shall be responsible for all costs it may incur in complying

with this paragraph

14 Except as expressly provided to the contrary in this Agreement each Paliy

to this Agreement shall bear its own legal and other costs incurred in connection with this

matter including the preparation and perfOlmance of this Agreement

II

15 This Agreement is intended to be for the benefit of the Parties only The

Parties do not release any claims against any other person or entity except to the extent

provided for in Paragraph 9 (waiver for beneficiaries paragraph) above

16 Except as otherwise stated in this Agreement this Agreement is intended

to be for the benefit of the Parties only and by this instrument the Paliies do not release

any liability against any other person or entity

[7 Upon receipt of the State Settlement payments described in paragraph I

above the Pmiicipating States shall consent to Relators dismissal ofthe Civil Action as

to the claims for the Covered Conduct and without prejudice as to all other state law

claims

18 In addition to all other payments and responsibilities under this Agreement

CVSphatmacy agrees to pay all reasonable expenses of the State Team CVSphannacy

will pay this amount by separate check made payable to the National Association of

Medicaid Fraud Control Units after the Medicaid Participating States execute their

respective Agreements or as otherwise agreed by the Paliies

19 Nothing in this Agreement constitutes an agreement by the State

concerning the characterization of the amounts paid hereunder for purposes of the States

revenue code

20 This Agreement is governed by the laws of the State

21 The undersigned CVSphmmacy signatories represent and warrant that

they are authorized as a result of appropriate corporate action to execute this Agreement

The undersigned State signatories represent that they are signing this Agreement in their

12

official capacities and that they are authorized to execute this Agreement on behalf of the

State through their respective agencies and departments

22 This Agreement is effective on the date of signature of the last signatory to

this Agreement (the Effective Date) However no obligations under this Agreement

shall begin to run until the Effective Date of the Federal Settlement Agreement as that

term is defined in the Federal Settlement Agreement Facsimiles of signatures shall

constitute acceptable binding signatures for purposes of this Agreement

23 This Agreement shall be binding on CVSpharmacys parent successors

transferees heirs and assigns

24 This Settlement Agreement constitutes the complete agreement between

the Parties with respect to tlus matter and shall not be amended except by written consent

of the Paliies

25 This Agreement may be executed in counterpmis each of which shall

constitute an original and all of which shall constitute one and the same Agreement

26 All Parties consent to the States disclosure of this Agreement and

information about this Agreement to the public

13

STATE OF CALIFORNIA

1 By Dated~1

Nicholas N Paul Supervising Deputy Alloriley General Office of the Attorney General Bureau of Medi-Cal Fraud and Elder Abuse 1455 Frazee Road Suite 315 San Diego CA 92l()8

By

Toby Douglas Director California Del)artlllen of Health Care Services 1501 CapitolAvenue Suite 716001 Sacramento CA 95814

14

9 CVSphmmacy shall not seek payment for any of the claims for

reimbursement to Medicaid covered by this Agreement from any health care beneficiaries

or their parents sponsors legally-responsible individuals or third-party payors

10 CVSpharmacy expressly warrants that it has reviewed its financial

condition and that it is currently solvent within the meaning of 11 USC sectsect 547(b)(3)

and 548(a)(B)(ii)(I) and shall remain solvent following payment of the Federal

Settlement Amount and compliance with sub-paragraphs IllIb(i) (ii) and (iv) of the

Federal Settlement Agreement Further the Parties expressly wanant that in evaluating

whether to execute this Agreement the Parties (a) have intended that the mutual

promises covenants and obligations set forth herein constitute a contemporaneous

exchange for new value given to CVSpharmacy within the meaning of 11 USC sect

547(c)(I) and (b) have concluded that these mutual promises covenants and obligations

do in fact constitute such a contemporaneous exchange

II In the event CVSpharmacy commences or another party commences

within 91 days of the Effective Date of this Agreement or any payment made hereunder

any case proceeding or other action under any law relating to bankruptcy insolvency

reorganization or relief ofdebtors (a) seeking to have any order for relief of

CVSsphannacys debts or seeking to adjudicate CVSpharmacy as bankrupt or

insolvent or (b) seeking appointment of a receiver tl1lstee custodian or other similar

official for CVSphannacy or for all or any substantial part ofCVSspharmacys assets

CVSpharmacy agrees as follows to the extent consistent with applicable law

(a) CVSspharmacys obligations under this Agreement may not be avoided

pursuant to 11 USC sectsect 547 or 548 and CVSpharmacy shall not argue or otherwise

9

take the position in any such case proceeding or action that (i) CVSspharmacys

obligations under this Agreement may be avoided under II USC sectsect 547 or 548 (ii)

CVSpharmacy was insolvent at the time tillS Agreement was entered into or became

insolvent as a result of the payment made to the State hereunder or (iii) the mutual

promises covenants and obligations set fOlih in this Agreement do not constitute a

contemporaneous exchange for new value given to CVSpharmacy

(b) If CVSpharmacy s obligations under this Agreement are avoided for any

reason including but not limited to through the exercise of a trustees avoidance powers

under the Bankruptcy Code the State at its sole option may rescind the releases

provided in this Agreement and bring any civil andlor administrative action or

proceeding against CVSfphatmacy for the liability that would otherwise be covered by

the releases provided in this Agreement If the State chooses to do so CVSfpharmacy

agrees that for purposes only of any actions or proceedings referenced in this first clause

of this Paragraph any such actions or proceedings brought by the State (including any

proceedings to exclude CVSphalmacy from participation in the States Medicaid

program) are not subject to an automatic stay pursuant to 11 USc sect 362(a) as a result

ofthe action case or proceeding described in the first clause of this Paragraph and that

CVSphalmacy shaH not argue or otherwise contend that the States actions or

proceedings are subject to an automatic stay CVSfpharmacy shall not plead argue or

otherwise raise any defenses under the theories of statute of limitations laches estoppel

or similar theories to any such civil or administrative actions or proceedings whicb are

brought by the State within 90 calendar days of written notification to CVSpharmacy

that the releases herein have been rescinded pursuant to this Paragraph except to the

10

extent such defenses were available before June 24 2005 and the State has a valid

demand against CVSpharmacy in the amount of its share of the State Settlement Amount

plus applicable multipliers and penalties and it may pursue its demand inter alia in the

case action or proceeding referenced in the first clause of this Paragraph as well as in

any other case action or proceeding and CVSphannacy acknowledges that its

agreements in this Paragraph are provided in exchange for valuable consideration

provided in this Agreement

12 The Parties each represent that this Agreement is freely and voluntllfily

entered into without any degree of duress or compulsion whatsoever

13 CVSphatmacy agrees to cooperate fully and truthfully with any State

investigation of individuals or entities not released in this Agreement Upon reasonable

notice CVSphannacy shall facilitate and agrees not to impair the cooperation of its

directors officers employees or agents for interviews and testimony consistent with the

rights and privileges of such individuals and of CVSpharmacy Upon request

CVSphatmacy agrees to nlrnish the State complete and unredacted copies of all nonshy

privileged documents reports memoranda of interviews and records in its possession

custody or control concerning individuals entities and or conduct not released in this

Agreement CVSpharnlacy shall be responsible for all costs it may incur in complying

with this paragraph

14 Except as expressly provided to the contrary in this Agreement each Paliy

to this Agreement shall bear its own legal and other costs incurred in connection with this

matter including the preparation and perfOlmance of this Agreement

II

15 This Agreement is intended to be for the benefit of the Parties only The

Parties do not release any claims against any other person or entity except to the extent

provided for in Paragraph 9 (waiver for beneficiaries paragraph) above

16 Except as otherwise stated in this Agreement this Agreement is intended

to be for the benefit of the Parties only and by this instrument the Paliies do not release

any liability against any other person or entity

[7 Upon receipt of the State Settlement payments described in paragraph I

above the Pmiicipating States shall consent to Relators dismissal ofthe Civil Action as

to the claims for the Covered Conduct and without prejudice as to all other state law

claims

18 In addition to all other payments and responsibilities under this Agreement

CVSphatmacy agrees to pay all reasonable expenses of the State Team CVSphannacy

will pay this amount by separate check made payable to the National Association of

Medicaid Fraud Control Units after the Medicaid Participating States execute their

respective Agreements or as otherwise agreed by the Paliies

19 Nothing in this Agreement constitutes an agreement by the State

concerning the characterization of the amounts paid hereunder for purposes of the States

revenue code

20 This Agreement is governed by the laws of the State

21 The undersigned CVSphmmacy signatories represent and warrant that

they are authorized as a result of appropriate corporate action to execute this Agreement

The undersigned State signatories represent that they are signing this Agreement in their

12

official capacities and that they are authorized to execute this Agreement on behalf of the

State through their respective agencies and departments

22 This Agreement is effective on the date of signature of the last signatory to

this Agreement (the Effective Date) However no obligations under this Agreement

shall begin to run until the Effective Date of the Federal Settlement Agreement as that

term is defined in the Federal Settlement Agreement Facsimiles of signatures shall

constitute acceptable binding signatures for purposes of this Agreement

23 This Agreement shall be binding on CVSpharmacys parent successors

transferees heirs and assigns

24 This Settlement Agreement constitutes the complete agreement between

the Parties with respect to tlus matter and shall not be amended except by written consent

of the Paliies

25 This Agreement may be executed in counterpmis each of which shall

constitute an original and all of which shall constitute one and the same Agreement

26 All Parties consent to the States disclosure of this Agreement and

information about this Agreement to the public

13

STATE OF CALIFORNIA

1 By Dated~1

Nicholas N Paul Supervising Deputy Alloriley General Office of the Attorney General Bureau of Medi-Cal Fraud and Elder Abuse 1455 Frazee Road Suite 315 San Diego CA 92l()8

By

Toby Douglas Director California Del)artlllen of Health Care Services 1501 CapitolAvenue Suite 716001 Sacramento CA 95814

14

take the position in any such case proceeding or action that (i) CVSspharmacys

obligations under this Agreement may be avoided under II USC sectsect 547 or 548 (ii)

CVSpharmacy was insolvent at the time tillS Agreement was entered into or became

insolvent as a result of the payment made to the State hereunder or (iii) the mutual

promises covenants and obligations set fOlih in this Agreement do not constitute a

contemporaneous exchange for new value given to CVSpharmacy

(b) If CVSpharmacy s obligations under this Agreement are avoided for any

reason including but not limited to through the exercise of a trustees avoidance powers

under the Bankruptcy Code the State at its sole option may rescind the releases

provided in this Agreement and bring any civil andlor administrative action or

proceeding against CVSfphatmacy for the liability that would otherwise be covered by

the releases provided in this Agreement If the State chooses to do so CVSfpharmacy

agrees that for purposes only of any actions or proceedings referenced in this first clause

of this Paragraph any such actions or proceedings brought by the State (including any

proceedings to exclude CVSphalmacy from participation in the States Medicaid

program) are not subject to an automatic stay pursuant to 11 USc sect 362(a) as a result

ofthe action case or proceeding described in the first clause of this Paragraph and that

CVSphalmacy shaH not argue or otherwise contend that the States actions or

proceedings are subject to an automatic stay CVSfpharmacy shall not plead argue or

otherwise raise any defenses under the theories of statute of limitations laches estoppel

or similar theories to any such civil or administrative actions or proceedings whicb are

brought by the State within 90 calendar days of written notification to CVSpharmacy

that the releases herein have been rescinded pursuant to this Paragraph except to the

10

extent such defenses were available before June 24 2005 and the State has a valid

demand against CVSpharmacy in the amount of its share of the State Settlement Amount

plus applicable multipliers and penalties and it may pursue its demand inter alia in the

case action or proceeding referenced in the first clause of this Paragraph as well as in

any other case action or proceeding and CVSphannacy acknowledges that its

agreements in this Paragraph are provided in exchange for valuable consideration

provided in this Agreement

12 The Parties each represent that this Agreement is freely and voluntllfily

entered into without any degree of duress or compulsion whatsoever

13 CVSphatmacy agrees to cooperate fully and truthfully with any State

investigation of individuals or entities not released in this Agreement Upon reasonable

notice CVSphannacy shall facilitate and agrees not to impair the cooperation of its

directors officers employees or agents for interviews and testimony consistent with the

rights and privileges of such individuals and of CVSpharmacy Upon request

CVSphatmacy agrees to nlrnish the State complete and unredacted copies of all nonshy

privileged documents reports memoranda of interviews and records in its possession

custody or control concerning individuals entities and or conduct not released in this

Agreement CVSpharnlacy shall be responsible for all costs it may incur in complying

with this paragraph

14 Except as expressly provided to the contrary in this Agreement each Paliy

to this Agreement shall bear its own legal and other costs incurred in connection with this

matter including the preparation and perfOlmance of this Agreement

II

15 This Agreement is intended to be for the benefit of the Parties only The

Parties do not release any claims against any other person or entity except to the extent

provided for in Paragraph 9 (waiver for beneficiaries paragraph) above

16 Except as otherwise stated in this Agreement this Agreement is intended

to be for the benefit of the Parties only and by this instrument the Paliies do not release

any liability against any other person or entity

[7 Upon receipt of the State Settlement payments described in paragraph I

above the Pmiicipating States shall consent to Relators dismissal ofthe Civil Action as

to the claims for the Covered Conduct and without prejudice as to all other state law

claims

18 In addition to all other payments and responsibilities under this Agreement

CVSphatmacy agrees to pay all reasonable expenses of the State Team CVSphannacy

will pay this amount by separate check made payable to the National Association of

Medicaid Fraud Control Units after the Medicaid Participating States execute their

respective Agreements or as otherwise agreed by the Paliies

19 Nothing in this Agreement constitutes an agreement by the State

concerning the characterization of the amounts paid hereunder for purposes of the States

revenue code

20 This Agreement is governed by the laws of the State

21 The undersigned CVSphmmacy signatories represent and warrant that

they are authorized as a result of appropriate corporate action to execute this Agreement

The undersigned State signatories represent that they are signing this Agreement in their

12

official capacities and that they are authorized to execute this Agreement on behalf of the

State through their respective agencies and departments

22 This Agreement is effective on the date of signature of the last signatory to

this Agreement (the Effective Date) However no obligations under this Agreement

shall begin to run until the Effective Date of the Federal Settlement Agreement as that

term is defined in the Federal Settlement Agreement Facsimiles of signatures shall

constitute acceptable binding signatures for purposes of this Agreement

23 This Agreement shall be binding on CVSpharmacys parent successors

transferees heirs and assigns

24 This Settlement Agreement constitutes the complete agreement between

the Parties with respect to tlus matter and shall not be amended except by written consent

of the Paliies

25 This Agreement may be executed in counterpmis each of which shall

constitute an original and all of which shall constitute one and the same Agreement

26 All Parties consent to the States disclosure of this Agreement and

information about this Agreement to the public

13

STATE OF CALIFORNIA

1 By Dated~1

Nicholas N Paul Supervising Deputy Alloriley General Office of the Attorney General Bureau of Medi-Cal Fraud and Elder Abuse 1455 Frazee Road Suite 315 San Diego CA 92l()8

By

Toby Douglas Director California Del)artlllen of Health Care Services 1501 CapitolAvenue Suite 716001 Sacramento CA 95814

14

extent such defenses were available before June 24 2005 and the State has a valid

demand against CVSpharmacy in the amount of its share of the State Settlement Amount

plus applicable multipliers and penalties and it may pursue its demand inter alia in the

case action or proceeding referenced in the first clause of this Paragraph as well as in

any other case action or proceeding and CVSphannacy acknowledges that its

agreements in this Paragraph are provided in exchange for valuable consideration

provided in this Agreement

12 The Parties each represent that this Agreement is freely and voluntllfily

entered into without any degree of duress or compulsion whatsoever

13 CVSphatmacy agrees to cooperate fully and truthfully with any State

investigation of individuals or entities not released in this Agreement Upon reasonable

notice CVSphannacy shall facilitate and agrees not to impair the cooperation of its

directors officers employees or agents for interviews and testimony consistent with the

rights and privileges of such individuals and of CVSpharmacy Upon request

CVSphatmacy agrees to nlrnish the State complete and unredacted copies of all nonshy

privileged documents reports memoranda of interviews and records in its possession

custody or control concerning individuals entities and or conduct not released in this

Agreement CVSpharnlacy shall be responsible for all costs it may incur in complying

with this paragraph

14 Except as expressly provided to the contrary in this Agreement each Paliy

to this Agreement shall bear its own legal and other costs incurred in connection with this

matter including the preparation and perfOlmance of this Agreement

II

15 This Agreement is intended to be for the benefit of the Parties only The

Parties do not release any claims against any other person or entity except to the extent

provided for in Paragraph 9 (waiver for beneficiaries paragraph) above

16 Except as otherwise stated in this Agreement this Agreement is intended

to be for the benefit of the Parties only and by this instrument the Paliies do not release

any liability against any other person or entity

[7 Upon receipt of the State Settlement payments described in paragraph I

above the Pmiicipating States shall consent to Relators dismissal ofthe Civil Action as

to the claims for the Covered Conduct and without prejudice as to all other state law

claims

18 In addition to all other payments and responsibilities under this Agreement

CVSphatmacy agrees to pay all reasonable expenses of the State Team CVSphannacy

will pay this amount by separate check made payable to the National Association of

Medicaid Fraud Control Units after the Medicaid Participating States execute their

respective Agreements or as otherwise agreed by the Paliies

19 Nothing in this Agreement constitutes an agreement by the State

concerning the characterization of the amounts paid hereunder for purposes of the States

revenue code

20 This Agreement is governed by the laws of the State

21 The undersigned CVSphmmacy signatories represent and warrant that

they are authorized as a result of appropriate corporate action to execute this Agreement

The undersigned State signatories represent that they are signing this Agreement in their

12

official capacities and that they are authorized to execute this Agreement on behalf of the

State through their respective agencies and departments

22 This Agreement is effective on the date of signature of the last signatory to

this Agreement (the Effective Date) However no obligations under this Agreement

shall begin to run until the Effective Date of the Federal Settlement Agreement as that

term is defined in the Federal Settlement Agreement Facsimiles of signatures shall

constitute acceptable binding signatures for purposes of this Agreement

23 This Agreement shall be binding on CVSpharmacys parent successors

transferees heirs and assigns

24 This Settlement Agreement constitutes the complete agreement between

the Parties with respect to tlus matter and shall not be amended except by written consent

of the Paliies

25 This Agreement may be executed in counterpmis each of which shall

constitute an original and all of which shall constitute one and the same Agreement

26 All Parties consent to the States disclosure of this Agreement and

information about this Agreement to the public

13

STATE OF CALIFORNIA

1 By Dated~1

Nicholas N Paul Supervising Deputy Alloriley General Office of the Attorney General Bureau of Medi-Cal Fraud and Elder Abuse 1455 Frazee Road Suite 315 San Diego CA 92l()8

By

Toby Douglas Director California Del)artlllen of Health Care Services 1501 CapitolAvenue Suite 716001 Sacramento CA 95814

14

15 This Agreement is intended to be for the benefit of the Parties only The

Parties do not release any claims against any other person or entity except to the extent

provided for in Paragraph 9 (waiver for beneficiaries paragraph) above

16 Except as otherwise stated in this Agreement this Agreement is intended

to be for the benefit of the Parties only and by this instrument the Paliies do not release

any liability against any other person or entity

[7 Upon receipt of the State Settlement payments described in paragraph I

above the Pmiicipating States shall consent to Relators dismissal ofthe Civil Action as

to the claims for the Covered Conduct and without prejudice as to all other state law

claims

18 In addition to all other payments and responsibilities under this Agreement

CVSphatmacy agrees to pay all reasonable expenses of the State Team CVSphannacy

will pay this amount by separate check made payable to the National Association of

Medicaid Fraud Control Units after the Medicaid Participating States execute their

respective Agreements or as otherwise agreed by the Paliies

19 Nothing in this Agreement constitutes an agreement by the State

concerning the characterization of the amounts paid hereunder for purposes of the States

revenue code

20 This Agreement is governed by the laws of the State

21 The undersigned CVSphmmacy signatories represent and warrant that

they are authorized as a result of appropriate corporate action to execute this Agreement

The undersigned State signatories represent that they are signing this Agreement in their

12

official capacities and that they are authorized to execute this Agreement on behalf of the

State through their respective agencies and departments

22 This Agreement is effective on the date of signature of the last signatory to

this Agreement (the Effective Date) However no obligations under this Agreement

shall begin to run until the Effective Date of the Federal Settlement Agreement as that

term is defined in the Federal Settlement Agreement Facsimiles of signatures shall

constitute acceptable binding signatures for purposes of this Agreement

23 This Agreement shall be binding on CVSpharmacys parent successors

transferees heirs and assigns

24 This Settlement Agreement constitutes the complete agreement between

the Parties with respect to tlus matter and shall not be amended except by written consent

of the Paliies

25 This Agreement may be executed in counterpmis each of which shall

constitute an original and all of which shall constitute one and the same Agreement

26 All Parties consent to the States disclosure of this Agreement and

information about this Agreement to the public

13

STATE OF CALIFORNIA

1 By Dated~1

Nicholas N Paul Supervising Deputy Alloriley General Office of the Attorney General Bureau of Medi-Cal Fraud and Elder Abuse 1455 Frazee Road Suite 315 San Diego CA 92l()8

By

Toby Douglas Director California Del)artlllen of Health Care Services 1501 CapitolAvenue Suite 716001 Sacramento CA 95814

14

official capacities and that they are authorized to execute this Agreement on behalf of the

State through their respective agencies and departments

22 This Agreement is effective on the date of signature of the last signatory to

this Agreement (the Effective Date) However no obligations under this Agreement

shall begin to run until the Effective Date of the Federal Settlement Agreement as that

term is defined in the Federal Settlement Agreement Facsimiles of signatures shall

constitute acceptable binding signatures for purposes of this Agreement

23 This Agreement shall be binding on CVSpharmacys parent successors

transferees heirs and assigns

24 This Settlement Agreement constitutes the complete agreement between

the Parties with respect to tlus matter and shall not be amended except by written consent

of the Paliies

25 This Agreement may be executed in counterpmis each of which shall

constitute an original and all of which shall constitute one and the same Agreement

26 All Parties consent to the States disclosure of this Agreement and

information about this Agreement to the public

13

STATE OF CALIFORNIA

1 By Dated~1

Nicholas N Paul Supervising Deputy Alloriley General Office of the Attorney General Bureau of Medi-Cal Fraud and Elder Abuse 1455 Frazee Road Suite 315 San Diego CA 92l()8

By

Toby Douglas Director California Del)artlllen of Health Care Services 1501 CapitolAvenue Suite 716001 Sacramento CA 95814

14

STATE OF CALIFORNIA

1 By Dated~1

Nicholas N Paul Supervising Deputy Alloriley General Office of the Attorney General Bureau of Medi-Cal Fraud and Elder Abuse 1455 Frazee Road Suite 315 San Diego CA 92l()8

By

Toby Douglas Director California Del)artlllen of Health Care Services 1501 CapitolAvenue Suite 716001 Sacramento CA 95814

14

DATED - i L 1 () II

DATED ~~OI7

FOR CVSIPHARt1ACY INC AND CVS CAREMARK CORPORATION

_)1 _ ~7 l ) Y G eM - h)C--_

BARBARA ROWLAND Vice President and Assistant General Counsel CVS Carcmark Corporation

--A-Hmiddoti~ldN~k1ii King amp Spalding Counsel for CVS Caremalk Corporation

15